Like it or not, the campaign season is upon us, and that
almost certainly means somebody is going to try to buy your vote with a
tax cut — even though average federal tax rates are already low in
historical terms, our tax code remains tilted in favor of the wealthy,
and our children, neighborhoods and infrastructure desperately need
public investment.
I tried to use my imagination and think of how a thoughtful and
intelligent liberal like Bernstein might conceive of tax policy. But I
could not come up with any scenario under which this statement might be
considered true: “our tax code remains tilted in favor of the wealthy.”
The plain fact of the matter is that the federal tax system is highly
graduated, or what liberals call “progressive.” Lower-income households
pay much smaller shares of their income in taxes than do higher-income
households.
In his article, Bernstein uses data from the respected Tax Policy Center (TPC), as I do here.
The first table shows TPC estimates of average federal tax rates (total
taxes divided by income) for U.S. households (specifically, “tax
units”) in five income groups.
Average Federal Tax Rates, 2015
Income Group |
Income Tax |
Payroll Tax |
Other Taxes |
Total Taxes |
Lowest |
-5.0%
|
6.4%
|
2.2%
|
3.6%
|
Second |
-1.9
|
7.6
|
2.1
|
7.8
|
Middle |
2.9
|
7.9
|
2.3
|
13.1
|
Fourth |
6.1
|
8.4
|
2.5
|
17.0
|
Highest |
15.6
|
6.0
|
4.1
|
25.7
|
The average household in the highest group will pay 25.7 percent of
its income toward taxes in 2015, which compares to 3.6 percent in the
lowest group. The average household in the middle group will pay a rate
about half that of the highest group. I don’t see how this data can be
reconciled with Bernstein’s claim.
Data from other sources shows the same tilt in tax burdens toward
high earners. Actually, “piling on” on high earners is more accurate
than “tilt.” The following screenshot is from Table A-6 in this Joint Committee on Taxation report.
I’ve circled the key column. Average tax rates rise rapidly as income
rises. The highest earners in 2015 will pay an average federal tax rate
of 33.1 percent, which is about twice the rate of those with middling
incomes, and many times the rate of people at the bottom.
Perhaps Bernstein meant “tilted in favor of the wealthy” compared to
other countries. But we have pretty solid data showing that is not
correct either. Tax Foundation summarizes OECD data here showing that the U.S. has the most graduated, or progressive, tax system among the high-income nations.
Bernstein is right that the “campaign season is upon us.” But that
doesn’t give him license to tilt tax data upside down to fit his policy
narrative."
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